Court of Appeals of Arizona, First Division, Department D
JOHN H. CLARK, a single man, Plaintiff/Appellee,
RENAISSANCE WEST, LLC, a foreign limited liability company doing business in Arizona as SPRINGDALE WEST; RENAISSANCE WEST REALTY, LLC, Defendants/Appellants.
Appeal from the Superior Court in Maricopa County Cause No. CV2011-080050 The Honorable Emmet J. Ronan, Judge
Hornstein & Bennett PLLC Scottsdale, Gail R. Hornstein James G. Bennett Attorneys for Appellants
Udall Shumway PLC, H. Micheal Wright Lincoln M. Wright Attorneys for Appellee
ANDREW W. GOULD, Presiding Judge
¶1 This appeal examines whether the trial court erred in ruling that an arbitration agreement was substantively unconscionable because the cost to arbitrate was prohibitively high. For the following reasons, we affirm.
Facts and Procedural Background
¶2 After having surgery for a hip fracture, eighty-eight-year-old John H. Clark ("Plaintiff") was admitted into Springdale West, a skilled nursing facility owned by Renaissance West, LLC and Renaissance West Realty, LLC (collectively, "Defendants"). Three days later, he signed an arbitration agreement (the "Agreement") which required Plaintiff to arbitrate all disputes with the facility.
¶3 After his discharge, Plaintiff filed a complaint against Defendants in Superior Court, which included claims for medical negligence and abuse and neglect of a vulnerable adult pursuant to Arizona Revised Statutes ("A.R.S.") section 46-455, et seq. The claims were based on Plaintiff's allegation that while he was at Defendants' facility, he was neglected by nursing staff and consequently developed a severe pressure ulcer on his back that tunneled to the bone and required medical treatment and long-term care.
¶4 Defendants moved to dismiss and to compel arbitration. The court held an evidentiary hearing at which Plaintiff's expert testified that based on the complex nature of Plaintiff's claims, it would cost Plaintiff approximately $22, 800 in arbitrator's fees to arbitrate the case. Plaintiff testified that he was retired and lived on a fixed income, and that based on the likely amount of arbitrator's fees, he could not afford to arbitrate his claims.
¶5 After the evidentiary hearing, the trial court ruled that the Agreement was substantively unconscionable and therefore unenforceable as a matter of law. The court based this finding in part on its determination that Plaintiff's limited income would make it extremely difficult, if not impossible, for Plaintiff to pay the arbitrator's fees necessary to arbitrate his case. Accordingly, the trial court denied Defendants' motion to dismiss and to compel arbitration.
¶6 Defendants timely appealed. We have jurisdiction over the order denying the motion to compel arbitration pursuant to A.R.S. § 12-2101.01(A)(1).
¶7 Whether a contract is unconscionable is a question of law that we review de novo. Maxwell v. Fid. Fin. Servs., Inc., 184 Ariz. 82, 88-89, 907 P.2d 51, 57-58 (1995). However, we defer to any factual findings made by the trial court, unless such findings are clearly erroneous. Harrington v. Pulte Homes Corp., 211 Ariz. 241, 247, 252, ¶¶ 16, 40, 119 P.3d 1044, 1050, 1055 (App. 2005).
¶8 An unconscionable contract is unenforceable. Id. at 252, ¶ 39, 119 P.3d at 1055; see also A.R.S. § 12-1501 (arbitration agreements are not enforceable on "such grounds as exist at law or in equity for the revocation of any contract"). There are two types of contractual unconscionability: substantive and procedural. Nelson v. Rice, 198 Ariz. 563, 567, 12 P.3d 238, 242 (App. 2000). Procedural unconscionability addresses the fairness of the bargaining process, which "is concerned with 'unfair surprise, ' fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should." Maxwell, 184 Ariz. at 88-89, 907 P.2d at 57-58 (quoting Dan B. Dobbs, 2 Law of Remedies § 10.7, at 706 (2d ed. 1993)). In contrast, substantive unconscionability addresses the fairness of the terms of the contract itself. Id. at 88, 907 P.2d at 58. A contract may be substantively unconscionable ...